Mastercard to raise fees by at least 400% for EU firms selling to UK customers, from October 15

From October 15, Mastercard will charge 1.5 per cent of the transaction value for every online credit card payment from the UK to the EU, up from 0.3 per cent at the moment. For debit card payments, the fee will jump from 0.2 per cent to 1.15 per cent.

Mastercard will increase fees more than fivefold when a British shopper uses a debit or credit card to buy from an EU-based company, sparking alarm among companies that rely on online payments and concern among MPs over higher consumer prices, according to The Financial Times.

Mastercard and Visa levy an “interchange” fee on behalf of banks for every debit or credit card payment that uses their networks. The EU introduced a cap in 2015 after concerns the hidden fees were leading to hundreds of millions of euros in costs for companies and higher prices for consumers.

But Mastercard has told merchants that the cap no longer applies to some transactions post-Brexit, because payments between the UK and European Economic Area are now deemed “inter-regional”. From October 15, Mastercard will charge 1.5 per cent of the transaction value for every online credit card payment from the UK to the EU, up from 0.3 per cent at the moment. For debit card payments, the fee will jump from 0.2 per cent to 1.15 per cent.

The increase will benefit British banks and other card issuers, rather than Mastercard itself. Consumers will face higher costs if companies choose to pass on the fee, a further burden on purchasing products from EU-based companies. Extensive red tape has been imposed on buying and selling products between the UK and EU after Brexit, alongside customs and VAT charges.

“Some people might put this change down to Brexit, but it is actually just greed.” said Joel Gladwin, head of policy at the Coalition for a Digital Economy, which represents British start-ups. “Not only does this hurt the already squeezed bottom lines of ecommerce start-ups and subscription businesses, it comes at a time when a huge number of small businesses have shifted to online models to survive.”

Mastercard processes the majority of credit card transactions in the UK, and a growing proportion of debit card payments. Visa, which leads in the debit card market, has not announced any changes to its fees, but has not ruled it out. A spokesperson said “should any change to interchange be appropriate, Visa would aim to provide our clients with advance notice to help them plan ahead”.